Houston isn't the cheapest place to do business -- but that's not all that matters

Skilled labor and "quality of life" are still the most important factors.

Shreveport, Louisiana is among the nation's cheapest places to do business.

Shreveport, Louisiana is among the nation's cheapest places to do...

Texas cities have a reputation for being good places to do business. But that doesn't mean they're the cheapest.

Every other year, the global accounting firm KPMG puts together an index of the cost of running companies across the world, benchmarking against the United States. This year, Houston, Austin, Dallas-Fort Worth and Austin all outperformed the national average, scoring lower for costs like real estate, labor, utilities, and taxes. Of those, San Antonio came in first, with an index value of 94.7 compared to last-place Houston's 97.6.

That's not bad, from the perspective of a business owner thinking about where to locate a new plant or headquarters. Certainly better than cities like San Francisco and New York, which scored well above the national average.

Still, it's far behind the cities that rank the cheapest: Places like Youngstown, Ohio and Shreveport, Louisiana, which came in at 92.5 and 91.7 respectively. Louisiana paid to have a few more of its smaller cities included in the report, and costs were even lower in places like Houma and Monroe. The state, which is seeking any economic development edge it can find, trumpeted its good marks in a press release last week. But is that really something to celebrate?

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Prices, after all, are in part a function of demand: If something's inexpensive, it may mean that not many people want what you're selling. Youngstown, for example, is near the bottom of a long period of deindustrialization and outmigration. Abandoned buildings are abundant and unemployment is well above the national average. Some businesses may look at that as an opportunity -- and others, a note of caution.

The KPMG report acknowledges this, with a "context" section that lays out the other variables companies look for when considering where to invest. Top among them is the availability of skilled labor, which suggests the importance of maintaining a robust education system. Then comes highway accessibility and "quality of life," a nebulous factor that includes everything from clean air and water to decent restaurants. All of those require the government to invest in infrastructure, not just make sure it's cheap to set up shop.

And besides, if U.S. cities were just competing on costs, they'd already be beat out by other cities around the world. The strong dollar has made the U.S. much less attractive compared to not just developing countries like Mexico, which ranks the cheapest in the world, but also countries in Western Europe including France, Germany, Italy, the U.K. and the Netherlands.

Which just means that America is going to have to make sure the quality of its cities, its people, and its government services are higher than ever.